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Charities tend to have fairly standard policies for accepting vehicle donations. First, contact the charity for applications, which they may mail or you can access online. Charities require the title to the vehicle, and cannot accept a vehicle that has a lien. If you need to request a duplicate title, it may take two weeks to receive it in the mail.
If your vehicle does not run, it must be parked where a tow truck can reach it. Some charities have policies to tow donated vehicles, regardless of whether they still run. Inform the charity if there are any major parts broken or missing, because the defects will affect the value of your donation and possibly whether the charity can accept it. Expect to receive a tax receipt after one or two months.
Make sure you understand federal and state policies for charities accepting vehicle donations. The policies not only protect the charities from abuse and fraud but they also protect the donors making vehicle donations. These policies include getting receipts for the donations and making sure the receipts contain the charity's name and identification number.
Watchdog groups that monitor vehicle donations report they have received phone calls from donors who did not get a receipt from the charity, and cannot remember the name of it. Other donors who did not transfer the title, as required, later learn they are responsible for traffic and parking tickets accumulated by someone else.
Are you new to vehicle donations? Did you read about vehicle donations in an advertisement? Or, do you know someone who has donated a car?
Here are some tips to first-time givers planning vehicle donations, the values of which may be hundreds or thousands of dollars.
Don't say yes to the first charity that you read about, or that asks for help with vehicle donations. Determine which causes you want to support. Perhaps you want to give to cancer research, an animal rescue group or your church. Identify the cause and charity, then find out if the organization offers vehicle donation programs. Many major charities have policies for accepting vehicle donations. Shop around and learn what policies the charities have in place for accepting vehicles, including how the proceeds are used, and what portion of the money goes directly to services and programs.
If your car is inoperable, you can still donate to a charity but the deduction you can take will be different than if you donated a working car.
Some charities accept the inoperable vehicle donations, then sell the vehicle's parts. But donors should not expect to receive full value for tax deductions of junk cars or cars that do not run.
Policies for vehicle donations have toughened since 2005, when Congress enacted laws to prevent abuses in car donation programs for charity and the policies for accepting vehicles vary by charity. Some charities do not accept vehicle models older than 15 years. Others only require inflated tires on donated vehicles, so they can be towed and processed for their parts.
Contact charities for more information.
Charity watchdog groups like Charity Navigator (www.charitynavigator.org) encourage donors to check a charity's financial welfare when donating.
Before making vehicle donations, ask how much of the charity's overall budget goes to direct services and programs, and how much is for administrative costs.
Look for charities that spend three-quarters of their budget on direct programs and services. Find out the portion of proceeds from vehicle donation that go to charitable causes versus how much is spent on processing fees for car donations.
Careful recordkeeping is required when making vehicle donations, the result of tighter charitable giving laws that became effective in 2005. Among the documents donors need is a written acknowledgement by the charity that it received the vehicle donation. The acknowledgement must identify the donor and the vehicle identification number, known as the VIN.
Often charities will resell the vehicle donations and collect the proceeds after costs. If such a transaction takes place, the charity must certify for the donor that the vehicle was sold at arm's length to an unrelated party.
The donor will need this document at tax time. The charity also must list the gross proceeds from the sale. Donors need these documents when itemizing vehicle donations for income tax deductions. If you get confused by the requirements, check with an accountant or your local IRS office before making the donation.
New policies for accepting vehicle donations limit the amount donors can write off on their income taxes. What do these new policies mean for donors who want to give unwanted cars to charity and then take the tax deduction?
If the used vehicle is valued at more than $500, the tax deduction cannot exceed the amount the charity gets reselling the car. The donor will need to rely on the charity for information on how much it got for reselling the car. The donor will need to have that amount in hand when claiming a deduction at tax time. If the charity plans to keep and refurbish the car, the donor is entitled to claim the fair market value.
In both cases, the charity also is required to provide written acknowledgement of the transfer to the donor. The acknowledgement needs to be supplied within 30 days after the vehicle donation.
Donors are entitled to claim fair market value on donated vehicles, if charities plan to keep and use the car for charitable work. But donors will need to get documentation from the charities on how they will use the donated vehicles. In order to claim a tax deduction, donors will need:
* A written statement from the charity on how it will use the vehicle. The charity also needs to estimate in writing how long it expects to use the donated car.
* A certified statement from the charity that it will not sell the vehicle before the length of time ends on its intended use for the car.
Americans used to be able to claim fair market value on most any donated vehicle. Not so anymore. In 2004, Congress passed the American Jobs Creation Act. It contained vast changes for valuing vehicle donations. As a result, the IRS has a tougher policy for accepting vehicle donations as tax deductions.
The tax deduction for donated vehicles worth more than $500 cannot top the gross proceeds the charity receives selling the vehicle. The taxpayer also needs written acknowledgment of the donation from the charity and must attach a copy to his or her tax return.
|Sheri Ann Richerson|